STEEL INDUSTRY

Why ArcelorMittal SA was protected

The works: ArcelorMittal SA’s steel plant outside Vanderbijlpark is a significant asset of the company. Picture: BUSINESS DAY/RUSSELL ROBERTS

Trade and Industry Minister Rob Davies issued a strong defence on Wednesday on the government’s protection of ArcelorMittal SA, arguing that this had helped to preserve SA’s primary steel production.

Responding to questions in Parliament, the minister rejected claims that this protection of an “uncompetitive, monopolistic” company was at the expense of the battling downstream industry, which could not cope with ArcelorMittal’s prices.

If the primary steel sector was not preserved, Davies said, there would be no downstream sector, especially as SA did not have the port capacity necessary to import all its primary steel requirements.

What was needed, he said, was to achieve a balance between the interests of the primary and downstream sectors. This was what the government was trying to achieve. The dilemma required that tough choices be made.

In return for government support, ArcelorMittal made pricing commitments while the Department of Economic Development recently announced the creation of a R1.5bn development fund to support downstream steel producers.

Davies noted that the work of the interdepartmental task team on steel had not yet been finalised and was continuing.

The International Trade Administration Commission was also considering the use of trade remedies to protect the domestic steel industry from cheap imported products.

He noted that since 2015, SA, like the rest of the world, had suffered from the global glut of steel that had led to dumping the product across the world, plant closures and job losses.

Other initiatives that had been taken to protect the local steel industry included an increase in the general rate of customs duty on primary steel products in return for reciprocal commitments by ArcelorMittal on job retention, investments and pricing.

A tariff review had also been undertaken on the import tariffs on a range of downstream steel products and the deployment of rebates, Davies said. Agreement had been reached on a set of principles for flat steel pricing in the country so that it was priced appropriately and in such a way that the steel-dependent industries remained competitive and upstream steel mills at the same time remained sustainable.

Changes had also been introduced to the local procurement requirements by the government so that locally manufactured primary steel had to be used in infrastructure projects.

Efforts were being made to boost the exports of high-value steel products

Downstream steel-intensive products and components for construction had also been designated for government procurement, he said.

The competition issues involving ArcelorMittal had also been dealt with and the company had been required to pay a R1.5bn fine for violating the Competition Act.

Davies said that the government provided investment support to steel producers through incentives under section 12 (i) of the Income Tax Act and incubation support for small and medium enterprises.

He noted that the Department of Trade and Industry was finalising an application to the Treasury for an export tax on scrap metal and was working with other departments and agencies to ensure stronger policing of steel imports.

In addition, efforts were being made with industry associations to boost the exports of high-value steel products to regional infrastructure and mining industries.